05 May 2025
A new and historic step has been taken in India’s housing finance industry. LIC Housing Finance has issued Residential Mortgage-Backed Securities (RMBS) worth ₹10 billion (Rs 1000 crore), which is the first such RMBS listing in India. This move is not only important for the company but is also considered a major achievement for the Indian financial market.
In this article, we will understand what is RMBS, why this listing is special, how it will benefit investors and housing finance companies and other important information related to it.
RWhat is RMBS? (Residential Mortgage-Backed Securities)
Residential Mortgage-Backed Securities (RMBS) are financial instruments in which bonds are created based on housing loans.
To understand in simple language:
- When a housing finance company gives loans to people to buy a house,
- Then a fund is created by collecting the amount of those loans.
- Then that fund is sold to investors in the form of bonds.
- Investors get interest and principal in exchange for these bonds, which is returned by the customers in the form of EMI.
Why is LIC Housing Finance’s initiative special?
India’s first RMBS listing:
Till now RMBS was available only to institutional investors. For the first time it has been listed in the public market.
₹ 10 billion issue:
The RMBS issue of such a large amount is proof that LIC Housing’s mortgage portfolio is strong.
Attracting new investors:
Now housing finance companies can raise funds directly from common investors.
What will be the benefits of RMBS?
- For housing companies: Companies will be able to convert loan portfolio into cash and the ability to give new loans will increase.
- For investors: Now even common people can invest in long-term, low-risk bonds.
- Reduce pressure on the banking system: When companies raise money from the market, the burden of credit demand on banks will reduce.
Role of RBI and SEBI
Both Reserve Bank of India (RBI) and SEBI have jointly laid down rules to make the process of RMBS listing transparent and secure. SEBI has issued guidelines for listing these securities and ensuring that investors get the right information.
Why was this initiative necessary?
The demand for housing loans in India is constantly increasing, but housing finance companies face funding problems. It is not always easy to get a loan from a bank, and not every company can depend on the banking system. In such a situation, RMBS is a good option that helps companies raise funds directly from the market.
What will be its impact on the Indian real estate sector?
- Possibility of cheap loans: If companies get cheap funds, they will be able to give loans at lower interest rates.
- Boost in home construction: When loans are cheap, more people will want to buy homes, which will lead to a boom in real estate.
- Benefit in small cities: Companies like LIC Housing also work in small cities and towns. Customers there will also benefit from RMBS.
Future Prospects
Now that the public listing of RMBS has begun in India, other housing finance companies may also follow this path. This may make RMBS a common investment product in the future, like mutual funds or bonds.
Risks and Precautions
Credit Risk: If the home loan borrower is unable to pay the EMI, RMBS investors may suffer losses.
Transparency of the system is necessary: Transparency and regulation are very important in this new product so that investors’ confidence is maintained.
Conclusion : India’s first RMBS listing by LIC Housing Finance is a historic move. It marks a new beginning in India’s financial market and will strengthen the housing finance industry. Also, investors have another new investment option available. If regulated properly, RMBS can make a big contribution in meeting the financial needs of the housing sector in India
Disclaimer: This article is for informational purposes only. Please consult your financial advisor before investing. MoneyFlowInsight is not responsible for any decision taken based on any information provided in this article.
